Cipro database in disarray?

More than 750 000 companies have been deregistered by Cipro, which has brought the integrity of its database into question.

The integrity of the Companies and Intellectual Property Registration Office (Cipro) database has been called into question, after it was revealed that 750 000 companies were deregistered in one day.

The office has been under fire recently after it was discovered that directors at Kalahari Resources were changed without the proper authority being granted, and the company was hijacked. The matter has now gone to court as the original directors seek to have the changes reversed.

Cipro is also not likely to be ready to implement new requirements under the new Companies Act, which should come into force next month. The office requires its IT systems to be overhauled to cope with more responsibilities under the new Act.

However, an enterprise content management system implementation by Valor IT has stalled, after the Department of Trade and Industry (DTI) canned the R153 million deal. That matter is also set to head to court, and the department has yet to explain how it intends having Cipro ready in time for the new Act, or whether sections of the Act may be delayed until the office is ready.

Subsequently, questions submitted to Parliament by the Democratic Alliance shadow minister of trade and industry Andricus van der Westhuizen have revealed that the office recently deregistered almost a quarter of all the entities that were registered over the last 200 years, in one day.

Cipro recently implemented a huge clean up of its database, and required companies to submit annual returns, or be deregistered. However, the database could not cope with the volumes of returns that were submitted before the mid-July cut-off date, and its electronic site stalled.

The Companies Act requires that all companies file an annual return providing up-to-date information with the agency. If companies do not file, Cipro assumes they are no longer in business, and deregisters the entities.

Closed corporations must file returns in the month in which they were registered, even if some of these entities are shelf companies. Cipro had given companies that have been in arrears for the past two years grace until 16 July to comply.

Van der Westhuizen says more than 750 000 companies and close corporations were deregistered as a result of this process. He adds that this is equivalent to 25 times the amount of companies that were deregistered during all of last year, and three times the total amount of entities that were registered last year.

However, says Van der Westhuizen, many companies are likely to be in the dark about their new non-existent status, and many were not able to comply with Cipro's requirements to submit returns through its Web site.

“Many companies have complained, since 2009, that it has been a nightmare to get access to the Cipro Web site. The Web site has been notoriously slow, leading to repeated 'time-out' errors on clients' computers, requiring clients to log onto the page repeatedly,” argues Van der Westhuizen.

He says the massive clean up “does little to instil faith in the validity and accuracy of the Cipro database”. He argues that the enormous amount of companies that did not submit returns indicates that the office is not performing daily maintenance on its database.

“This is another sure sign that the Department of Trade and Industry should have intervened in the management of Cipro much earlier, when allegations of fraud and mismanagement first surfaced early in 2009,” argues Van der Westhuizen.

He points out that the DTI waited until May of this year to cancel the R153 million contract with Valor IT. Van der Westhuizen says the trade and industry minister Rob Davies has not clarified when implementation will go ahead, despite being asked this in a Parliamentary question.

Elsabé Conradie, Cipro's head of communication, marketing and stakeholder relations, says the office's database is cleaned up on a regular basis. However, Cipro had given entities additional time to submit returns because many people were not aware of the requirement, she says.

Conradie explains that there could be devastating consequences for the economy if Cipro was to deregister a company simply because someone within the entity did not do their job. She says Cipro found that many people were no longer interested in retaining their registered entity during the clean-up exercise.

A second round of de-registrations will take place towards the end of October, says Conradie. She says checks and balances are followed when companies and close corporations are deregistered. However, she confirms that the process is automated and there is no human intervention.

Chris Gilmour, Absa Investments analyst, questions if it is possible for Cipro to implement all the necessary checks and balances when such a large amount of companies were wiped off its database in one clean-up.

He says that, based on previous complaints about Cipro's systems, it does not seem that the office's IT is robust enough to handle such a huge cleanout.

Mark Walker, director of the IDC Middle East and Africa's vertical industry practice division, has previously pointed out that Cipro's database is vital for tax, economic and regulatory planning.

Walker said Cipro's database of information is one measure that is used by analysts and economists for strategic planning. “If that database is wrong, then my strategic planning is wrong.”